What is Utility?
The goods satisfy human wants. This want satisfying quality in a good is called Utility. Utility is that quality in a commodity by virtue of which it is capable of satisfying a human want. Air, water (free goods) and food, cloth etc. (economic goods) satisfies people’s wants and hence they possess utility.
In day to day life we use this term in different way but in Economics utility is having a specific meaning. Hence
a) Utility and usefulness are different. For example a poison when we consume it is definitely injurious and hence it never is useful but it satisfies the human want, i.e. the want of person who decides to suicide and hence it possesses utility.
b) Utility is not synonymous with pleasure. A good which possess utility may not give pleasure when. Consumed e.g. a medicine when a patient consumes does not give pleasure since mostly it is bitter. But it possesses utility because it is required to cure from sickness. Thus pleasure is different and utility is different.
c) Utility is subjective means no commodity possesses utility in itself independently of the consumer. It is a consumer’s mind which gives it utility. A literate person may find utility in books, new paper etc. as he is able to read those, but on the contrary an illiterate person never find any utility. Thus utility depends on mans mind rather than on the things itself.
d) Utility varies in different situations. Moreover the same things may possess different utilities for different purposes. For example water has different utilities when it is used for drinking, bathing and washing purposes.
Types of Utility:
From Utility: Due to change in form there is change in utility, e.g. Wood when transformed into furniture, utility will increase.
Place utility: When goods transported from one place to another place utility can increase. For example apple will fetch more prices in other part of country than in Kashmir and Himachal Pradesh.
Time utility: By storing a commodity and selling it at a time of scarcity, utility can be realized more.